Federal Register / Vol. 63, No. 134 /Tuesday, July 14, 1998 / Notices 37913

1 15 U.S.C. 78s(b)(1).

2 17 CFR 240.19b-4.

3See Exchange Act Release No. 40087 (June 12,

1998), 63 FR 33746 (June 19, 1998). The NASD’s

position limit filing established position and

exercise limits for conventional equity options

identical to those being proposed by PCX in this

filing.

4The Commission notes that issuers would, of

course, need to comply with all applicable

provisions of the federal securities laws in

conducting their share repurchase programs.

5See Exchange Act Release No. 39032 (September

9, 1997) 62 FR 48683 (September 16, 1997). The

Commission stated that ‘‘the elimination of position

and exercise limits for FLEX equity options allows

the Exchanges to better compete with the growing

OTC market in customized equity options, thereby

encouraging fair competition among brokers and

exchange markets.’’ Id. at 48685. The Commission

notes that approval of the elimination of position

and exercise limits for FLEX equity options was

granted for a two-year pilot period and was based

on several other factors including, in large part,

additional safeguards adopted by the exchanges to

allow them to monitor large options positions.

6 15 U.S.C. 78f(b).

7 15 U.S.C. 78f(b)(5).

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 34–40172; File No. SR–PCX–

98–33]

Self-Regulatory Organizations; Notice

of Filing of Proposed Rule Change by

the Pacific Exchange, Inc. Relating to

an Increase in Position and Exercise

Limits for Standardized Equity Options

July 6, 1998.

Pursuant to Section 19(b)(1) of the

Securities Exchange Act of 1934

(‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule

19b-4 thereunder,2 notice is hereby

given that on July 1, 1998, the Pacific

Exchange, Inc. (‘‘PCX’’ or ‘‘Exchange’’)

filed with the Securities and Exchange

Commission (‘‘Commission’’ or ‘‘SEC’’)

the proposed rule change as described

in Items I, II and III below, which Items

have been prepared by the selfregulatory organization. The

Commission is publishing this notice to

solicit comments on the proposed rule

change from interested persons.

I. Self-Regulatory Organization’s

Statement of the Terms of Substance of

the Proposed Rule Change

The PCX is proposing to modify Rule

6.8 and Rule 6.9 relating to position and

exercise limits. The PCX proposes to

increase the position and exercise limits

on standardized equity options traded

on the Exchange to three times their

current levels.

II. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

In its filing with the Commission, the

self-regulatory organization included

statements concerning the purpose of

and basis for the proposed rule change

and discussed any comments it received

on the proposed rule change. The text

of these statements may be examined at

the places specified in Item IV below.

The self-regulatory organization has

prepared summaries, set forth in

sections A, B and C below, of the most

significant aspects of such statements.

A. Self-Regulatory Organization’s

Statement of the Purpose of, and

Statutory Basis for, the Proposed Rule

Change

1. Purpose

Currently, PCX Rule 6.8 subjects

equity options to one of five different

position limits depending on the trading

volume and outstanding shares of the

underlying security. The levels are:

4,500; 7,500; 10,500;, 20,000; and 25,000

contracts on the same side of the

market. Under the proposed changes the

new limits would be: 13,500; 22,500;

31,500; 60,000; and 75,000 contracts on

the same side of the market. The

Exchange believes that sophisticated

surveillance techniques at the options

exchanges adequately protect the

integrity of the markets for the options

that will be subject to these increased

position and exercise limits. The

Commission recently approved a similar

request from the National Association of

Securities Dealers (‘‘NASD’’) to triple

the position and exercise limits for

conventional equity options with new

limits set at 13,500; 22,500; 31,500;

60,000; and 75,000 contracts on the

same side of the market.3

Commentary .01 of PCX Rule 6.9

refers to the established exercise limits

as 4,500; 7,500; 10,500; 20,000; and

25000 options contracts. The rule states

that the exercise limits established

pursuant to PCX Rule 6.9(a) shall be

4,500; 7,500; 10,500; 20,000; and 25,000

options contracts of any particular class

of option and it shall be the

responsibility of each Member or

Member Organization accepting orders

for the purchase (in opening

transactions) of option contracts to

inform customers of the applicable

exercise limits. The PCX proposes to

change the exercise limits in PCX Rule

6.9 to 13,500; 22,500; 31,500; 60,000;

and 75,000 options contracts of any

particular class of option.

The Exchange believes that the

existing surveillance procedures and

reporting requirements at options

exchanges and clearing firms that have

been developed over the years are able

to properly identify unusual and illegal

trading activity. In addition, PCX

believes that routine oversight

inspections of PCX’s regulatory

programs by the Commission have not

uncovered any material inconsistencies

or shortcomings in the manner in which

the Exchange’s market surveillance is

conducted.

Position and Exercise Limits Restrict

Legitimate Options Use and

Competition. In the Exchange’s view,

equity position limits prevent large

customers like mutual funds and

pension funds from using options to

gain meaningful exposure to individual

stocks, resulting in lost liquidity in both

the options market and the stock

market. The Exchange further believes

that equity position limits also act as a

barrier to the use of options by

corporations wishing to implement

options strategies with their own stock.4

The Exchange believes that equity

position limits put listed options at a

competitive disadvantage of over-thecounter (‘‘OTC’’) derivatives. OTC

dealers can execute options trades

through overseas subsidiaries not

subject to NASD regulation, and

therefore not subject to position limits.

As a result, the largest trades can go

unobserved and unmonitored for

regulatory and oversight purposes. An

increase in the position limits is

consistent with the Commission’s

reasons for the elimination of FLEX

equity option position limits. The

Commission recently approved the

elimination of position limits for FLEX

equity options stating that the

elimination will allow the listed options

markets to better compete with the OTC

market.5

In addition, the Commission recently

approved the NASD’s proposed rule

change to raise the position and exercise

limit for conventional equity options

(i.e., those options not issued, or subject

to issuance by the Options Clearing

Corporation) to three times their current

levels (which is the same as three times

the levels established by current

exchange rules for standardized

options). Because conventional options

often have nearly identical term as

standardized, exchange-traded options,

the Exchange believes the position

limits for standardized options should

be at least as high as those for

conventional options.

2. Basis

The Exchange believes that the

proposal is consistent with Section

6(b) 6 of the Act, in general, and Section

6(b)(5) 7 of the Act, in particular, in that

it is designed to perfect the mechanisms

of a free and open market, to promote

just and equitable principles of trade, to
37914 Federal Register / Vol. 63, No. 134 /Tuesday, July 14, 1998 / Notices

facilitate transactions in securities, and

in general, to protect investors and the

public interest.

B. Self-Regulatory Organization’s

Statement on Burden on Competition

The Exchange does not believe that

the proposed rule change will impose

any burden on competition that is not

necessary or appropriate in furtherance

of the purposes of the Act.

C. Self-Regulatory Organization’s

Statement on Comments on the

Proposed Rule Change Received From

Members, Participants, or Others

Written comments on the proposed

rule change were neither solicited nor

received.

III. Date of Effectiveness of the

Proposed Rule Change and Timing for

Commission Action

Within 35 days of the date of

publication of this notice in the Federal

Register or within such longer period (i)

as the Commission may designate up to

90 days of such date if it finds such

longer period to be appropriate and

publishes its reasons for so finding or

(ii) as to which the self-regulatory

organization consents, the Commission

will:

(A) By order approve such proposed

rule change, or

(B) Institute proceedings to determine

whether the proposed rule change

should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to

submit written data, views and

arguments concerning the foregoing,

including whether the proposed rule

change is consistent with the Act.

Persons making written submission

should file six copies thereof with the

Secretary, Securities and Exchange

Commission, 450 Fifth Street, NW.,

Washington, D.C. 20549. Copies of the

submission, all subsequent

amendments, all written statements

with respect to the proposed rule

change that are filed with the

Commission, and all written

communications relating to the

proposed rule change between the

Commission and any person, other than

those that may be withheld from the

public in accordance with the

provisions of 5 U.S.C. 552, will be

available for inspection and copying in

the Commission’s Public Reference

Room, located at the above address.

Copies of such filing will also be

available for inspection and copying at

the principal office of the self-regulatory

organization. All submissions should

refer to File No. SR–PCX–98–33 and

should be submitted by August 4, 1998.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 98–18639 Filed 7–13–98; 8:45 am]

BILLING CODE 8010–01–M

DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

Index of Administrator’s Decisions and

Orders in Civil Penalty Actions;

Publication

AGENCY: Federal Aviation

Administration (FAA), DOT.

ACTION: Notice of publication.

SUMMARY: This notice constitutes the

required quarterly publication of an

index of the Administrator’s decisions

and orders in civil penalty cases. This

publication represents the quarter

ending on June 30, 1998. This

publication ensures that the agency is in

compliance with statutory indexing

requirements.

FOR FURTHER INFORMATION CONTACT:

James S. Dillman, Assistant Chief

Counsel for Litigation (AGC–400),

Federal Aviation Administration, 400

7th Street, SW., Suite PL 200–A,

Washington, DC 20590; telephone

number: (202) 366–4118.

SUPPLEMENTARY INFORMATION: The

Administrative Procedure Act requires

Federal agencies to maintain and make

available for public inspection and

copying current indexes containing

identifying information regarding

materials required to be made available

or published. 5 U.S.C. 552(a)(2). In a

notice issued on July 11, 1990, and

published in the Federal Register (55

FR 29148; July 17, 1990), the FAA

announced the public availability of

several indexes and summaries that

provide identifying information about

the decisions and orders issued by the

Administrator under the FAA’s civil

penalty assessment authority and the

rules of practice governing hearings and

appeals of civil penalty actions. 14 CFR

Part 13, Subpart G.

The FAA maintains an index of the

Administrator’s decisions and orders in

civil penalty actions organized by order

number and containing identifying

information about each decision or

order. The FAA also maintains a

cumulative subject-matter index and

digests organized by order number. The

indexes are published on a quarterly

basis (i.e., January, April, July, and

October.)

The FAA first published these

indexes and digests for all decisions and

orders issued by the Administrator

through September 30, 1990. 55 FR

45984; October 31, 1990. The FAA

announced in that notice that only the

subject-matter index would be

published cumulatively and that the

order number index would be noncumulative. The FAA announced in a

later notice that the order number

indexes published in January would

reflect all of the civil penalty decisions

for the previous year. 58 FR 5044; 1/19/

93.

The previous quarterly publications of

the indexes have appeared in the

Federal Register as follows:

Dates of quarter Federal Register publication

11/1/89–9/30/90 .... 55 FR 45984; 10/31/90

10/1/90–12/31/90 .. 56 FR 44886; 2/6/91

1/1/91–3/31/91 ...... 56 FR 20250; 5/2/91

4/1/91–6/30/91 ...... 56 FR 31984; 7/12/91

7/1/91–9/30/91 ...... 56 FR 51735; 10/15/91

10/1/91–12/31/91 .. 57 FR 2299; 1/21/92

1/1/92–3/31/92 ...... 57 FR 12359; 4/9/92

4/1/92–6/30/92 ...... 57 FR 32825; 7/23/92

7/1/92–9/30/92 ...... 57 FR 48255; 10/22/92

10/1/92–12/31/92 .. 58 FR 5044; 1/19/93

1/1/93–3/31/93 ...... 58 FR 21199; 4/19/93

4/1/93–6/30/93 ...... 58 FR 42120; 8/6/93

7/1/93–9/30/93 ...... 58 FR 58218; 10/29/93

10/1/93–12/31/93 .. 59 FR 5466; 2/4/94

1/1/94–3/31/94 ...... 59 FR 22196; 4/29/94

4/1/94–6/30/94 ...... 59 FR 39618; 8/3/94

7/1/94–12/31/94 .... 60 FR 4454; 1/23/95

1/1/95–3/31/95 ...... 60 FR 19318; 4/17/95

4/1/95–6/30/95 ...... 60 FR 36854; 7/18/95

7/1/95–9/30/95 ...... 60 FR 53228; 10/12/95

10/1/95–12/31/95 .. 61 FR 1972; 1/24/96

1/1/96–3/31/96 ...... 61 FR 16955; 4/18/96

4/1/96–6/30/96 ...... 61 FR 37526; 7/18/96

7/1/96–9/30/96 ...... 61 FR 54833; 10/22/96

10/1/96–12/31/96 .. 62 FR 2434; 1/16/97

1/1/97–3/31/97 ...... 62 FR 24533; 5/2/97

4/1/97–6/30/97 ...... 62 FR 38339; 7/17/97

7/1/97–9/30/97 ...... 62 FR 53856; 10/16/97

10/1/97–12/31/97 .. 63 FR 3373; 1/22/98

1/1/98–3/31/98 ...... 63 FR 19559; 4/20/98

The civil penalty decisions and

orders, and the indexes and digests are

available in FAA offices. In addition,

the Administrator’s civil penalty

decisions have been published by

commercial publishers (Hawkins

Publishing Company and Clark

Boardman Callahan) and are available

on computer on-line services (Westlaw,

LEXIS, Compuserve and FedWorld). A

list of the addresses of the FAA offices

where the civil penalty decisions may

be reviewed and information regarding

these commercial publications and

computer databases appear at the end of

this notice.